CFOs Must Realign Traditional Finance Organizations to Succeed in New eCommerce Economy, Study Says
Majority of Companies Ill-Prepared to Account for New Revenue/Cost Streams
NEW YORK, July 26, 2000 - E-commerce is requiring companies to redesign their corporate finance functions to enable e-business transformation, according to a new global survey published today by Accenture in cooperation with the Economist Intelligence Unit (EIU). The report, E-Commerce and the CFO: A framework for finance in the new economy, shows that many CFOs view their companies as lacking the necessary structure and culture to effectively account for today’s changing e-business conditions.
"Our survey, the first of its kind focusing on the impact of e-commerce on corporate finance, indicates that many CFOs doubt the ability of traditional metrics to evaluate key elements of operating in the new economy," said Daniel T. London, a partner in Accenture`s Finance and Performance Management group. "The majority of corporations are still applying traditional business evaluation techniques to e-business," he said.
Only 17 percent of survey respondents said new revenue/cost streams could be accounted for "very effectively" by established processes. Despite these concerns, 56 percent of respondents said they still apply traditional techniques when considering capital investments.
The survey confirms that most companies are aligning their e-business strategies with those of their traditional-economy businesses. However, many CFOs say that if e-business and legacy-business strategies are aligned, it is because traditional-economy relationships and performance are being viewed through the prism of e-business. The aim, they believe, is to use e-business initiatives to elevate the total value proposition, not to tie down new initiatives to the existing processes.
"E-commerce is changing the rules of the game and broadening the role of financial officers," says London. "New business models and innovative technologies are requiring greater levels of finance leadership to ensure long-term viability and success. Transforming brick and mortar companies to e-commerce players requires CFOs to reassess their approach to capital investment and rates of return. They are being asked to evolve at e-speed and, in several instances, reorder their priorities."
The survey shows the impact of e-business in the realm of increased emphasis on accelerated timelines for the planning and budgeting process. Illustrating just how dramatic the transition has been, 64 percent of respondents said their company has had an e-business strategy in place for two years or less.
In addition, 58 percent of respondents said that e-business strategy is reviewed on an ongoing basis, rather than annually. The survey also shows that by 2005, more than half of e-business initiatives will have a planning cycle of less than one year.
According to the study, CFOs must pursue key initiatives to solidify their resources into an effective e-finance framework which will require focusing on an e-finance philosophy that embraces the following:
- A new level of ownership in which finance adopts a distinct value proposition that supports corporate strategy to create value and deliver growth
- A discrete business plan in which a prioritized timeline is developed for introducing e-business initiatives that have been evaluated for their contribution to broad business goals over the short and longer term
- A new approach to what-if analysis that minimizes the role of historical data gathering and develops a new method for forecasting
Finally, e-commerce is driving the finance organization to enhance transaction processing, with an emphasis on "virtual" accounting, where transactions are processed without human intervention. There is an early sign of this trend in the move by companies to close their books faster, and perhaps, one day, virtually. Among the largest companies surveyed (with revenues in excess of $10 billion), 43 percent hoped to implement a virtual close by 2005.
Accenture`s Finance and Performance Management group specializes in transforming finance organizations and building solutions to generate bottom-line value. With expertise in e-finance, finance strategy, shared services, operational excellence, business process outsourcing and capability development, this group works with clients across a broad range of industries and geographies to drive the finance function of the future and redefine the role of the finance professional.
About the Economist Intelligence Unit
The Economist Intelligence Unit (EIU), the business-to-business arm of the Group which publishes The Economist, is the world’s leading provider of global business intelligence. Its mission is to help companies do better business by delivering intelligence on market conditions around the world which is timely, impartial and reliable. Through its global network of analysts, the EIU continuously assesses and forecasts political, economic and business conditions in 195 countries. The EIU, traditionally a print-based publisher, is now a fast-growing e-business, with over 500,000 networked users. Our analysis is available to executives through a digital portfolio that includes: the daily EIU ViewsWire; ebusinessforum.com, specialising in global intelligence on e-business; the data service, EIU CountryData; and the company’s flagship website and online store at eiu.com. The Thought Leadership Services division of the EIU develops leading edge research in cooperation with the world’s foremost consultancies, financial services and technology firms.
NOTE TO EDITORS: The report, "E-Commerce and the CFO: A framework for finance in the new economy," is based on a global survey conducted by the Economist Intelligence Unit (EIU) in cooperation with Accenture. The global survey covered 276 major corporations with a growing array of e-business initiatives. In addition, personal interviews were conducted with CFOs and other senior finance executives at 35 companies in North America, Europe and the Asia-Pacific region.
Companies participating in the survey included General Motors, General Electric, Chevron, Cummins Engine, British Telecom, Shell, Sabena, Southwest Airlines, Hutchison Whampoa, UBS, Astra Zeneca and UBS.
The study is available through the EIU Store at http://www.eiu.com or via electronic delivery from EIU Electronic: New York: Lisa Hennessey Tel: 1 (212) 554 0600 Fax: 1 (212) 586 0248; London: Jan Frost Tel: 44 (20) 7830 1007 Fax: 44 (20) 7830 1023. This publication is also available through the following online databases: FT Profile (UK) M.A.I.D/Profound (UK) MarkIntel (USA) Tel: 44 (20) 7 825 8000 Tel: 44 (20) 7 930 6900 Tel: 1 (617) 345 5933.
To view an extract of the study please click here.
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Roxanne Taylor
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